Getting it right: The Middle East’s generational wealth transfer

The Middle East is on the cusp of a profound economic and cultural shift. Family-owned businesses, responsible for generating 60% of the UAE’s GDP, are preparing to transfer a staggering $1 trillion in assets to their heirs over the next decade. Whilst this transition reflects the economic vitality of the region, it also introduces a set of challenges associated with the transfer of wealth on such a scale.

The UAE and its neighbouring countries across the Middle East experienced a rapid rise in economic development post-1950 with half of the 24 UAE family businesses featured in Forbes’ Top 100 Arab Family Businesses list established post-1970.

As these families look toward transitioning their wealth, the initial focus has been on establishing robust governance structures. This is essential for the neat transferral of vast wealth, often between large families, to avoid potential disputes that can arise from complicated and contentious generational transfers. Implementing and communicating effective succession plans is not just a financial necessity but a stabilising force for both the families involved and the broader economic landscape.

While the prospect of inheriting significant wealth might seem enviable, it brings its own set of psychological and emotional challenges. Children of high-achieving parents who have built considerable fortunes from nothing face immense pressure to succeed and a sometimes-powerful fear of failure – the shadow of successful parents can sometimes eclipse the personal achievements of children. These young heirs are often seen as privileged, having access to international educations, extensive networks, and opportunities to explore diverse interests – but on the other hand, the abundance of resources and opportunities can result in a lack of drive or direction.

Not just about wealth preservation, but also about legacy creation

The transfer of wealth between generations could also raise philosophical differences, particularly concerning sustainability and philanthropy. Younger generations are more likely to prioritise sustainable practices and socially responsible investments than their parent’s generation and as families navigate the transfer of wealth, they also need to reconcile these differing values and goals – part of the challenge is helping families reach the same values and vision. This is not just about wealth preservation but also about legacy creation—how these families want to be remembered and the impact they aspire to have on the world for generations to come.

The concept of the “burden” of inheritance is crucial to understanding the full implications of the first wealth transfer. It is not merely a financial or legal process but a transfer of identity, expectations, and perhaps most importantly, of future potential.

Through decades of experience, LGT has developed deep expertise in guiding high-net-worth families through the complexities of passing on their legacies. This knowledge is particularly vital at a time when we are poised to experience one of the most substantial wealth transfers in its history.

LGT is owned by the Princely Family of Liechtenstein, where long-term thinking and responsible stewardship have guided the transferral of their assets across 26 generations. For almost 900 years, the Princely Family has managed the transfer of its own wealth from generation to generation and this continuity and legacy remain the cornerstones of LGT’s approach to wealth management today. It is this heritage – and the platform we offer to connect likeminded families to exchange knowledge and experience – that makes LGT a trusted partner for families when it comes to planning and preparation for the transfer of intergenerational wealth for the first time.

Experienced in transferring wealth across 26 generations

A deep understanding that the long-term protection of wealth must be prioritised over rapid immediate growth is ingrained in LGT’s roots and is reflected in the Princely Family’s long history, which almost spans a millennium. The human instinct towards short-termism is in many ways at odds with the ambition of intergenerational wealth transfer. Earlier this year, during the Milken Institute Global Investor’s Symposium in Hong Kong, HSH Prince Max von und zu Liechtenstein, the Chairman of LGT, made exactly that point, stating that “annual returns are just relatively meaningless. You should care about what you make over five, 10 years. There are so many short-term things that can make one year look incredibly good or incredibly bad. Short-term orientation that is inherent in human beings is one of the root causes for a lot of problems”.

LGT’s approach is distinguished not only by its comprehensive wealth management services but also by its deep commitment to addressing the familial and emotional aspects of wealth transfer. Recognising that the successful management of wealth extends beyond financial transactions, LGT places a strong emphasis on education and preparation. This holistic approach ensures that wealth transfer is not just a transfer of assets but also a continuation of values, responsibilities, and family heritage.

Central to LGT’s educational initiatives is the Liechtenstein Academy. This independent institution is renowned for its tailored programmes that focus on the nuances of intergenerational wealth management, where LGT plays the role of facilitator in connecting peers and families from across its network to discuss the challenges and intricacies of the succession process. The Academy provides a unique forum for family members across different generations to come together to learn about the responsibilities and challenges associated with wealth.

These programmes are designed not only to educate on the technicalities of wealth management but also to foster an understanding of the psychological and relational dynamics that play a crucial role in a smooth transition. At the Liechtenstein Academy, participants engage in courses that cover a range of topics, from the legal aspects of estate planning to the emotional intelligence required to manage family expectations and relationships. The course is carefully crafted to prepare heirs for their future roles, equipping them with the knowledge and skills needed to preserve and enhance their family’s legacy.

This comprehensive preparation is vital to ensuring that the wealth transfer process strengthens family bonds and furthers enduring legacies, making LGT a trusted partner in the stewardship of intergenerational wealth.

Wealth transfer is more than just a financial transaction; it is a complex intergenerational exchange that will shape the Middle East’s future landscape. It requires a delicate balance of respecting tradition and embracing innovation, ensuring that the next generation not only inherits wealth but also the wisdom to manage it effectively. Through this, the Middle East can continue to build on its legacy and foster a future that respects both its past achievements and future potential.